by Calculated Risk on 9/12/2014 06:56:00 PM

From Tim Logan and Andrew Khouri at the LA Times: Housing price cuts point to a shift in Southland market

The latest sign that buyers are gaining leverage in Southern California's housing market: Price cuts are back.

The number of homes with reduced asking prices has risen sharply in recent months ... In Orange County, the region's priciest market, about one-third of sellers have been forced to cut prices, according to data from real estate firm Redfin. ...

These trends have been building all year. But home sellers -- often the last to see market shifts -- are finally getting the message, said Paul Reid, a Redfin agent in Temecula.

"A lot of what we've seen over the last six or eight weeks is people lowering their prices to get buyers in the door," Reid said.

Inventory has increased significantly in a number of markets, after bottoming in 2013.  And more inventory means slower price increases (maybe even price declines in some markets).  Yet many sellers have listed their homes assuming the double digit price increases would continue.  The result: no buyers and price cuts.

by Calculated Risk on 9/12/2014 01:18:00 PM

Here are some analyst comments on the upcoming FOMC meeting. From Nomura:

We expect the September FOMC meeting to give us additional insight into the future path of monetary policy. We will receive another round of FOMC forecasts for the first time since June, which will incorporate significant new data. Forecasts should also be extended to 2017, thus giving us a better sense of how the participants judge the current balance between actual and potential output.

We expect the FOMC to make changes to its forward guidance. At a minimum, we expect the FOMC to add language that stresses the “data dependence” of future interest rate decisions. We expect the FOMC to continue to state that the adjustment of interest rates, when it comes, will be “balanced” and that it expects interest rates to converge to normal levels more slowly than employment and inflation. But in light of sustained improvement in labor market performance, and the inherent complexities in assessing their state, we expect that the FOMC to drop its assessment that “lift-off” is still a “considerable time” away

From Merrill Lynch:

[P]inpointing the exact timing of the first rate hike is more of a guess than a forecast. Nonetheless, the case for an earlier move has grown over the last several months. ... The more immediate question is: when will the Fed change its rhetoric enough to scare the markets? In particular, could the FOMC do something big in its announcement on Wednesday? It is hard to predict the specific changes, but the risk of a hawkish signal is high:

• Given the soft August jobs report, we expect them to continue to see a “significant underutilization of labor resources.” That language change probably requires a couple of better jobs reports.

• It is a close call, but we expect them to modify their promise to keep the funds rate near zero for “considerable time.” However, they will try to change the statement in a market neutral fashion, dropping the reference to “considerable time” and substituting “considerable reduction in slack and notable progress toward the inflation goal.”

• We expect small changes in the FOMC forecasts. In particular, we see some risk of another uptick in the “dot plot.” At this meeting, they introduce forecasts for 2017, and we expect median “dots” of 3.25 to 3.50%.

• Finally, we think Yellen and her allies will try to avoid shocking the markets. In the past, when the FOMC has reworked its forward guidance, they have often softened the blow by explicitly noting that their view on the likely timing of the exit has not changed or by downplaying the change in the press conference.

And from Goldman Sachs:

With respect to the appropriate timing of the first hike of the funds rate, recent comments point to a greater clustering of FOMC participants' views around mid-2015. In particular, one or two FOMC participants (namely, Presidents Lockhart and Rosengren) have likely pulled forward their views on the most appropriate date for liftoff; there is nothing to indicate that those previously expecting a mid-2015 hike have moved; and the more hawkish participants have also likely stayed in place.

CR note: I'll post some thoughts on the upcoming meeting this weekend.

by Calculated Risk on 9/12/2014 09:55:00 AM

Click on graph for larger image.

The preliminary Reuters / University of Michigan consumer sentiment index for September was at 84.6, up from 82.5 in August.

This was above the consensus forecast of 83.1. Sentiment has generally been improving following the recession - with plenty of ups and downs - and a big spike down when Congress threatened to "not pay the bills" in 2011.

by Calculated Risk on 9/12/2014 08:41:00 AM

On a monthly basis, retail sales increased 0.6% from July to August (seasonally adjusted), and sales were up 5.0% from August 2013. Sales in July were revised up to a 0.3% increase from unchanged.  Sales in June were also revised up.

From the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for August, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $444.4 billion, an increase of 0.6 percent from the previous month, and 5.0 percent (±0.9%) above August 2013. ... The June to July 2014 percent change was revised from virtually unchanged to 0.3 percent.

Click on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).


Retail sales ex-autos were up 0.3%. 

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Retail sales ex-gasoline increased by 5.5% on a YoY basis (5.0% for all retail sales).

The increase in August was above consensus expectations of a 0.4% increase.

Including the upward revisions to June and July, this was a strong report.

by Calculated Risk on 9/11/2014 07:43:00 PM

First, from Merrill Lynch:

We have revised up our forecast for 3Q GDP growth to 3.5% from 3.0% and 2Q tracking has moved up to 4.8%, from 4.0%.

Some of this is a bounce back from the -2.1% decline in Q1 GDP (on a seasonally adjusted annual rate basis, SAAR).

Friday:
• At 8:30 AM ET, Retail sales for August will be released. The consensus is for retail sales to increase 0.4% in August, and to increase 0.3% ex-autos.

• At 9:55 AM, the Reuter's/University of Michigan's Consumer sentiment index (preliminary for September). The consensus is for a reading of 83.1, up from 82.5 in August.

• Also at 10:00 AM, Manufacturing and Trade: Inventories and Sales (business inventories) report for July. The consensus is for a 0.5% increase in inventories.